Risk and the allocation of talent in the Roy model

German Cubas, Pedro Silos and Vesa Soini

Economics Letters, 2024, vol. 236, issue C

Abstract: With risk-averse workers and uninsurable earnings shocks, competitive markets allocate too few workers to risky jobs. Using an equilibrium Roy model with incomplete markets, we show that in competitive equilibrium, risky occupations are inefficiently small and hence talent is misallocated.

Keywords: Misallocation; Occupations; Risk; Incomplete markets; Roy model (search for similar items in EconPapers)
JEL-codes: D91 E21 J31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:236:y:2024:i:c:s016517652400106x

DOI: 10.1016/j.econlet.2024.111623

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